Rev. Rul. 80-230

ISSUE

May a bank that uses an accrual method of accounting on a calendar year basis accrue on December 31, 1978, the semiannual assessment required to be paid to the Comptroller of the Currency on or before January 31, 1979, for the 6-month period beginning January 1, 1979?

FACTS

The taxpayer, a bank subject to the jurisdiction of the Comptroller of the Currency, uses an accrual method of accounting for reporting its income on a calendar year basis.

The provisions of 12 U.S.C.A. section 482 (Supp. 1979), which governs the assessment of national banks by the Comptroller of the Currency, provides that:

The expense of the examinations . . . shall be assessed by the Comptroller of the Currency upon national banks in proportion to their assets or resources. The assessments may be made more frequently than annually at the discretion of the Comptroller of the Currency. The annual rate of such assessment shall be the same for all national banks except that banks examined more frequently than twice in one calendar year shall, in addition, be assessed the expense of these additional examinations.

Section 8.2 (chapter 1 of Bank and Banking Regulations, 12 CFR section 8.2) provides that each national bank and each district bank shall pay to the Comptroller of the Currency on or before January 31 and July 31 of each year a semiannual assessment fee for the 6 month period beginning 30 days before each payment date. Each semiannual assessment is based upon the total assets shown in the bank's quarterly "Consolidated Report of Condition (Including Domestic and Foreign Subsidiaries)" most recently preceding the payment date. Each bank subject to the jurisdiction of the Comptroller of the Currency on the date of the second or fourth condition reports is subject to the full assessment for the next 6 month period without proration for any reason.

The semiannual assessment return for the first 6 months of 1979, based on the condition reports submitted for the fourth reporting period ending December 31, 1978, was prepared by the taxpayer and sent to the Comptroller of the Currency with the required payment on January 30, 1979.

LAW AND ANALYSIS

Section 1.461-1(a)(2) of the Income Tax Regulations provides that under an accrual method of accounting, an expense is deductible for the taxable year in which all the events have occurred that determine the fact of the liability and the amount thereof can be determined with reasonable accuracy.

The semiannual assessment for the first 6 months of 1979 is based upon the total assets reported by the taxpayer on its Consolidated Report of Condition (Including Domestic and Foreign Subsidiaries), filed for the reporting period ending December 31, 1978. The semiannual assessment is not due and payable in 1978 even though the amount thereof can be determined with reasonable accuracy as of the last day of business in 1978.

Generally, under section 1.461-1(a)(2) of the regulations, all the events have occurred that determine the fact of the liability when (1) the event fixing the liability, whether that be the required performance or other event, occurs, or (2) payment therefore is due, whichever happens earliest. Although the semiannual assessment is based upon the December 31, 1978, report of condition, it is not payable until January 31, 1979, and is for the 6-month period beginning January 1, 1979. Thus, all the events that determine the fact of liability for this semiannual assessment occur as of January 1, 1979, and have not yet occurred as of December 31, 1978.

HOLDING

A bank that uses an accrual method of accounting for reporting its income on a calendar year basis may not accrue on December 31, 1978, the semiannual assessment required to be paid to the Comptroller of the Currency on or before January 31, 1979, for the 6-month period beginning January 1, 1979.